Mexico suspends incentives to Chinese electric vehicle manufacturers in response to U.S. pressure

Mexico’s government, under pressure from the United States, is keeping Chinese automakers at bay by refusing to offer them incentives, such as low-cost public land or lower taxes, for investment in electric vehicle production, said three officials familiar with the matter.

The last meeting between senior officials and a Chinese automaker was in January, the sources said, with executives from BYD, one of the world’s largest electric vehicle makers by sales.

At the meeting, officials made it clear that they would not give stimulus like that given to automakers in the past and would suspend any future meetings with Chinese automakers, said the sources, who asked not to be identified.

Twenty Chinese automakers sell their products in Mexico but none yet has a plant in the country. Chinese cars represent a third of the total supply of brands in the Latin American nation.

Sources attributed the move to pressure from the U.S. government, specifically the Office of the United States Trade Representative (USTR), to keep Chinese automakers out of the North American free trade zone.

A USTR official’s response to Reuters did not address the reported pressure, but mentioned that the U.S.-Mexico-Canada Agreement (TMEC) was not intended to «provide a back door to China and others who may be looking to access our market without paying tariffs.»
The official said USTR is focused on that issue in relation to autos, steel and aluminum.

The U.S. intervention reflects increasingly acute fears from the auto industry, labor unions and policy circles in Washington that Chinese automakers such as BYD, SAIC, Geely, Chery and JAC intend to use Mexico as a back door to sell cheap electric cars in the United States without paying high U.S. tariffs, now at 27.5%.

Chinese automakers can avoid U.S. tariffs by locating in Mexico, as long as they comply with rules on how much of a vehicle must be produced locally.